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Businessweek Archives

Target The Sacred Cow Of Entitlements



The budget battles of the past decade have taught Washington's politicians one thing: Cutting entitlement spending can be hazardous to your political health. The upshot has been that entitlements--benefits to which you are entitled because you belong to a particular group--now consume almost half of all federal spending. Social Security, medicare, medicaid, farm supports, veterans' benefits, and other automatic-spending programs are outgrowing the budget and the economy (page 74). Within a decade, these transfer programs will eat up 14.2% of America's economic output.

A few officials, including President Bush, have conceded that there's no way to control the budget deficit without tackling entitlements. But the measures they are proposing--such as the White House's "mandatory spending cap"--duck the real issues. The President wants Congress to pledge $293.7 billion in cuts in entitlements over the next five years--but he won't say where those cuts can be made until after the election. Given that Bush's cap covers rapidly growing health care programs but leaves both Social Security and new taxes untouched, the cap ensures huge cuts in programs for farmers, veterans, the poor, and the disabled.

Entitlements are the right target for budget-cutters. Beneficiaries--especially middle- and upper-income retirees--largely escaped the deficit-cutting ax during the 1980s. But real and equitable savings will come only from specific benefit cuts and tax hikes on huge and popular programs--Social Security and medicare, to name the biggest. Until they face that bitter truth, today's entitlements cappers are just fudging their responsibilities.

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